Along with the upcoming RRSP contribution deadline, other important tax-related deadlines are coming up:
December 31st — is the last day to contribute using that calendar year’s TFSA room (unused room carries forward).
January 1st — Last year to make RRSP contributions if you were born in 1955. Note: the year you turn 71 is your final year to contribute to your own RRSP; December 31 of that year is the last day contributions are allowed before conversion to a RRIF.
But the big one for most working Canadians is the RRSP contribution deadline, the last day RRSP contributions will count toward your 2025 tax return. For the 2025 tax year, the RRSP contribution deadline is March 2, 2026, because March 1 falls on a weekend. A final contribution push in January and February could substantially lower your tax bill in April.
If you’re an employer, March 2nd should already be circled in your calendar. If you’re not, keep reading* to find out why it should be circled with thick red ink.
*Before reading on, jot down a reminder to check your CRA Notice of Assessment or CRA My Account after your T4 has been submitted to confirm your 2025 RRSP limit.
RRSP stands for “registered retirement savings plan,” and was introduced by the Canadian government in 1957 under Louis St. Laurent’s Liberal government as a way for Canadians to defer paying taxes on income through investing for retirement.
According to CTV, RRSPs were introduced by the federal government in 1957 as a way to encourage Canadians to save for retirement by allowing tax-deferred investment growth. The program was designed to complement public pensions and employer-sponsored plans by giving individuals more control over their retirement savings, particularly those without access to workplace pensions. However, two important trends also necessitated a nationwide effort to help Canadians save for retirement:
Canadian life expectancy crossed 70 years of age for the first time in 1957 and was set to skyrocket (which it did). Ensuring older Canadians had means to live comfortably in retirement was becoming increasingly important.
In his 1957 speech introducing the RRSP, the then finance minister Walter Harris called out employees who “were fortunate enough to work for companies that contributed to pension plans.” This may have seemed alarmist at the time, considering that employer-funded RPP coverage was in a period of substantial increase. However, our leaders could see that this arrangement was unsustainable for Canada’s employers. The first members of the massive baby boom generation were 12 years old in 1957, about to enter the workforce and expected to live well past 70 years. In response, Harris proposed allowing tax deferral on “limited amounts of earned income set aside for retirement by any taxpayer, whether an employee or not."
When the RRSP was introduced, the contribution limit was 10% of the previous year's earned income, up to a maximum of $2,500. The program has gone through a number of expansions over the years and has become one of the best short- AND long-term financial decisions you can make.
In short, you save more for tomorrow while paying less tax today. It’s truly a win-win.
Today: An RRSP contribution reduces the net income you’re taxed on for the year you make the contribution. Depending on your total income and contribution, you could put yourself into a lower tax bracket by saving for retirement.
Tomorrow: Gains earned from investments in your RRSP are not taxed, so your retirement fund can grow faster. You can withdraw from your RRSP at any time, but it will count as taxable income for the year it was withdrawn.
When you withdraw funds from an RRSP (outside of special programs like the Home Buyers’ Plan or Lifelong Learning Plan), the financial institution is required to withhold tax at the source and remit it to the CRA.
The federal withholding tax rates are:
10% on withdrawals up to $5,000
20% on withdrawals from $5,001 to $15,000
30% on withdrawals over $15,000
(In Québec, higher rates apply due to provincial withholding.)
It’s important to understand that this withholding tax is not the final tax — it’s a prepayment. The full withdrawal amount is added to your taxable income for the year, and your actual tax bill is calculated when you file your return. You may owe more tax or receive some of the withheld amount back, depending on your total income and marginal tax rate.
This is why RRSPs work best when:
You contribute while in a higher tax bracket, and
Withdraw when your income — and marginal tax rate — is lower, typically in retirement
Used this way, RRSPs don’t just defer tax; they can reduce the total tax you pay over your lifetime.
For the 2025 tax year, your RRSP contribution limit is 18% of your 2024 earned income, up to a maximum of $32,490, plus any unused contribution room carried forward from previous years.
For example, if you earned $200,000 in 2024, 18% would be $36,000, but your contribution room would be capped at $32,490 (before considering any carry-forward room).
Your exact RRSP contribution limit is shown on your most recent CRA Notice of Assessment or in CRA My Account.
Making RRSP contributions before March 2nd ensures the tax deductions are applied to your 2025 tax return. The deadline is 60 days after the start of the new year, giving you time to take stock of your finances after the holiday season and see how much you have left to contribute. It’s a generous gesture, but it can lead to negligence and eventually forgetfulness, which could leave you paying more in tax this year.
It’s true that any RRSP contributions made after the deadline will count towards next year’s deductions. But if you contributed this year, you could make next year’s contribution with this year’s tax refund.
March 2nd may be the last day to contribute to your RRSP, but it probably shouldn’t be the first. Many Optimize clients contribute regularly to their RRSPs over the course of the year so they’re good to go when the RRSP contribution cutoff date comes around. If you can do this, we recommend it for two reasons:
1) Things often go wrong when you leave them to the last minute, like internet disruption or sudden craziness at work. Why take the risk?
2) The sooner you contribute to your RRSP, the sooner your investment can start earning tax-free gains. Why leave money on the table?
Confusion is another common reason for missing the RRSP contribution deadline, so let’s clear up a few things.
You can withdraw funds from your RRSP under the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP) without immediate tax, provided you repay the amounts within the required repayment schedules. If you do not make the required repayments, the unpaid amounts are added to your taxable income for that year.
No law can force you to retire at any age. If you want (or need) to keep working forever, the government says “go for it.” Regardless of your employment status, by the end of the year you turn 71, your RRSP must be converted into a RRIF (Registered Retirement Income Fund), from which you must begin to withdraw from and pay tax on it.
Of course, if you keep working past this age and supplement your income with RRIF withdrawals, you’ll pay more in tax. So, in effect, the RRSP is also an incentive to retire, making space for younger Canadians to join the workforce.
What’s a spousal RRSP?
A spousal RRSP allows you to contribute to an RRSP in your spouse’s name using your own RRSP contribution room and claim the deduction on your tax return. This strategy can help split retirement income, as withdrawals may be taxed in your spouse’s hands, subject to attribution rules if withdrawals occur within three years of contribution.
Can existing investments be moved into an RRSP?
Yes. This is called making an “in-kind” contribution. In this case, you’d essentially be selling yourself the asset at fair market value. So, if you bought a stock for five dollars that grew in a non-registered account to nine dollars by the time you wanted to move it into your registered account, it would count as $9 towards your $33,810 total for the year, and you’d pay tax on the $4 earned.
You can open an RRSP the year you start working, and each life stage during your working years requires a different RRSP strategy.
The strategy here is simply to start and be consistent with your contributions. Retirement is a million years away, so you can take some risks with your RRSP because you have the runway to recover if they don’t go well.
Because RRSPs can only hold qualified investments, most private startups are not eligible. Younger investors may instead choose a higher-growth mix of qualified investments, such as equity ETFs or mutual funds, while balancing risk with diversification.
Now you’re starting to think about retirement. And even though you’re too far away to make concrete plans for your third act, you know it’s going to require money. This is where you might want to look at adding assets with more stability that you know will grow.
Retirement is on the horizon, you have clear ideas about your golden years, and a good idea of how much money you’ll need to do it. Do you have it? If not, what must you do to get it? At this stage, you probably have fewer financial commitments as your children are now caring for their own families. This is the time to make that final push towards reaching the financial goals you set when you first started earning money
Whatever life, career or RRSP stage you’re at, an Optimize financial advisor can help create retirement wealth with intention and protect it with equal intentionality.
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This content has been prepared for general informational and educational purposes only and does not constitute investment, tax, legal, or financial advice. The information provided is not intended as a recommendation or solicitation to buy or sell any security or to adopt any investment strategy. Readers should consult their own tax advisor or financial professional regarding their individual circumstances. All investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Not all investments are suitable for all investors.
Contribution limits, tax rules, and deadlines are based on current legislation and CRA guidance as of the date of publication and may change. Always confirm your RRSP and TFSA limits through your CRA Notice of Assessment or CRA My Account.